### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-0 8 -00 373 -CV

Da vid Al le n Ha ll , A ppe lla nt

v. P edernales Elect ric Cooper ative, Inc.; John Worrall, indi vidu ally and as repre sentative of others sim ilarly situated ; G lenn Van S hellenbeck, in divid ually an d as represe ntative of others sim ilarly situated; Lin da Evan s, ind ividu ally and as repre sentative of others sim ilarly situated; Benni e R. F uelberg; Will Dahm ann; W.W. “Bu d” Bu rnett ; E.B. Pr ice;

O.C. Harm on; R.B. F elps; Val Sm ith; and Vi Clou d, App ellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 353RD JUDICIAL DISTRICT NO. D-1- GN-07- 0022 34 , HO NORAB LE JO HN K . DIETZ , JUDGE PRESIDI NG

O P I N I O N Appellant Da

vid Allen Hall appe als from a final j udg ment approving the settlement ag ree ment in a class a ction lawsuit filed by appellee s J ohn Worrall, Glenn Va n S hellenbec k, and L inda Evans ( collectively , the “ C l as s R ep re s en t at i v es ”) , aga i n s tP ed ern al es Electric Coopera tive, I nc. (“PEC”) a nd a g roup of c urre nt and former P EC office rs and direc tors (the “ I ndividual Defe ndants”). Hall, a membe r of the c lass who objecte d to the terms of the settlement, argues on appe al that the trial court e rre d in cer

tify ing the class, appointing the class c ouns el an d cl ass re prese ntatives, and
a pp ro vin g the se ttl e me nt. We a ff ir m th e tr ia l c ourt ’s jud g me nt.2 STA ND AR

D O F RE VI EW Th e Te xas S up re me Court ha s h e ld t

hat “ [a]p pr ov a l of

a c la ss a c tio n s e ttl e me nt i s within the sound discretion of the tria l court and should not be r ever sed a b s en t an abuse of that discretion.” Ge n eral

Motors Corp. v. Bloyed , 916 S.W .2d 949, 955 (Tex. 1996). A trial cour t abuses its discre tion when it a cts in a n arbitra ry or unrea sonable manner , or without ref ere nce to a

ny g uiding r ules and princ iples. Downer v. Aquam arine Operators, Inc

. , 701 S.W
. 2 d 238, 241-42 (T e x. 19 85 ). I n re vie wi nga tr ia l c ourt ’s jud g me nt a

pp ro vin g a

c la ss- a c tio n s e ttl e me nt a g re e me nt, “the a ppellate c ourt must no t m er el y s u bstitut e its judgme nt for that of the trial court.” Bloyed , 916 S.W .2d at 955.
BACK GR OUND

PEC is a non-pr ofit entity , org aniz ed as a T exas electric cooper ative cor poration owned by its membe rs and subject to the Texas E lectric Cooperative Corpor ation Act. See Te x. Ut il. Code Ann. §§ 161.001-.254 (W es t 2 0 0 7 ). P EC is the larg est elec tric coope rative in the U nited States, serving 24 Texas counties. Any individual who purcha ses elec tricity throug h metere d service with PEC i s a member

and owne r of the c ooperative. I n J uly 2007, the Class Represe ntatives filed suit for de clar atory and injunctive re lief
a g a ins t PE C and

its ind ivi du a l of

fi c e rs and

dir e c tor s, br ing in g cl aim s o f n e g lig e nc e , g ro ss neg lige nce, br eac h of contra ct, and br eac h of fiducia ry duty
. These c laims were based on va rious alleg ations of mismanag ement, s e lf

- d e a li n g , a n d e xc e s s iv e c o mp e n s a

ti o n . T h e Cl a s s Rep rese ntatives
s o u g h t c la s s c e rti f

ic a ti o n , d is g o r g e me n t o f

mi s a p p r o p r iate d

f u n d s , r e mo v a l o f

PE C’ s o f f ic e r s and dir e c tor s, dama g e s f

or e xcess iv e com pe ns a tio n a nd imp ro pe r e xpe nd iture s, a s w e ll a s mu lti ple3

de c laratio ns re g ard inga lle g e d w ro ng do ingby PEC . T he Cla ss R e pr e se ntativ e s late r a me nd e d th e ir p e t i t i o n t o a d d c a

u s e s o f a c t i o nf o r c o n s t r u c t i v e f r a u d , a i d i n g an d

a b e t t i n g b r e a c h o f

f i d u c i ar y d u t y, civil conspirac y , tortious interfer ence with contrac t, and, in the alternative, a der ivative proc eeding on behalf of PEC. See Tex. Bus. Corp. Act a rt. 5.14 (West 2003). The Class Repre sentatives asse rted in th ei r pl eading s that PEC and the I ndividual De f e n d an t s c o n c e a l e d e xc e s s i v e o f f i c e r an d d i r e c t o r c o mp e n s a t i o n an d b e n e f i t s b y o m i t t ing thi s information from fede ral income tax forms and posted misleading information on the PEC website. The plea dings f

urther a lleg ed that the Individual Defe ndan t s brea ched the ir fiduciar y duties by purcha sing Envision, a w holly owned subsidiary , without proper due di l i gen ce , failing to require competitive bidding f

or softwa re billing servic es provided by Envision, and funnelingmilli ons of do lla rs of PEC c a pit a l to En vis ion wi th ou t prop e r d ue dil ig e nc e or

jus tif ic a tio n. Th e Cla ss Represe ntatives also ac cused PEC g ener al manag er B ennie R. F uelber g of “f ailing to provide notice of B oard me eting s, calling Boa rd m eeting s at the last minute, havingtelephonic B oard me eting s (and
n o t d i s cl osing the call-in number ), prohibiting me mber-owner attendance at workshops, c laiming to have no e mail acc ounts, and havingno direc t PEC t elephone numbers” in an attempt to conce al
ma te ri a l in fo rm a tio n r e g ard ingthe us e of PEC fu nd s. Finally , the C lass Represe ntatives took issue with PEC’s handling of sur plus funds repr esentingits accumulate d reta ined excess of re venues ove r expenses. These funds, which a re allocate d annually

to PEC m ember s in proportion to th e amount of ele ctricity purcha sed by

eac h member, a

re r efe rre d to as “patronag e ca pital” and ar e h eld in trust by PEC for the bene fit of the members. Unde r the Elec tri c C o o p er ative Corporation Act, an ele ctric c ooperative such as PEC4

is require d to periodi ca l l y return pa tronag e ca

pital to its members. See Tex. Util . Code Ann. § 161.059(d). The C lass Represe ntatives alleg ed that at t he ti me s uit was filed, PEC had never retu rn edp at ro n age cap i t al t o i t s m em b er s , re p o rt ed h o w p at ro n age cap i t al wa s b ei n g u s ed , o r n o t i fi ed the member s of their individual patrona g e ca p ital acc ount balance , despite the fa ct that PEC had repor ted patrona g e ca

pital in amounts rang ing from $1.2 milli on to $2.2 mill ion betwee n 2002 and 2006. PEC jus tified this de cision by citing a resolution passed at a 1987 boar d meeting , in which the direc tors resolved to r efr ain from returning patrona g e capital to the members until PEC achieve d at least a 40% asset to e quity ratio. The Class Repr esentatives urg ed that this 40% thr eshold “wa s arbitra rily selec ted by

the I ndivid u al Defendants, is virtually impossibl e to meet, a

nd was ne ver disclosed by

them to the Plaintiff Class prior to the filing of this li tigation.” Whil e su it w a s p e nd ing , PE C be g an ta kin g ste ps to r e me dy

iss ue s r a ise d b y

the Cla ss Re pr e se nta

tiv e s. Th ese m easu res in clu dedame nd in g it s b y law s t o m ake t he d ir ect or -e le c tio n p ro c e ss
m o re o p e n an d

d em o cr at i c, p o s t i n g fe d er al i n co m e t ax fo rm s o ni t s we b s i t e, an d cr ea t i n g a mechan i s m t o b egin returning patronag e ca pital to the members. F uelber g resig ned as g ener al
mana g e r, fo rf

e iti ng $6 00 ,0 00 in de fe rr e d co mpe ns a tio n, and his re pla c e me nt, Juan Ga rza , p ub lic ly voiced his commitment to bringingtranspar ency and open g overna

nce to PE C. Boar d President W.W . “B ud” B urnett also re signe d, and the “coordinator” posit ion he had held at P EC—a position that had bee n criticized by the Class Represe ntatives for its lack of value to the cooper ative and that involved a compe nsation packa g e of a pproxi mately

$200,000 per y ear

—was e liminated. I n Janu ary 20 08 , the tr ia l c ourt su sp e nd e d dis c ov e ry and he ari ng s in

or de r t o f a c ili tate settlement neg otiations. On Febr uary 8, 2008, the par

ties filed a Rule 11 ag ree ment, dismiss ing the5

non-voting advisory

direc tors of PEC a s defe ndants, as well as B arr y Adair, a voting dire ctor who was not y et on the boar d at the time of the alleg ed wrong doing. PEC’s boa rd of direc tors then voted to deleg ate a

uthority to the dismiss ed dire ctors to consider and appr ove settlement on P EC’s behalf
. The pa rties ultimately

rea ched a settlement ag ree ment, and on Apr il 9, 2008, written notice of the settlement ag ree ment was m ai l ed to eac h of the a pproxi mately

220,000 PEC members, notify ing the m th a t th e y

we re me mbe rs of the se ttl e me nt cl a ss, that the y ha d a rig ht to o bje c t to the se ttl e me nt, and that a f

airne ss hear ing w ould be held on Apr il 30, 2008. Notice was a lso p u b l ished in ever y
ne ws pa pe r w ith in P EC’ s se rv ic e are a and po ste d on the PEC we bs ite , a lon g wi th a c op y of the fu ll settlement ag ree ment and the Class Repre sentatives’ live pe tition.

Under the terms of the settlement ag ree ment, the settlement cla ss relea sed all re lated
c la ims a g a ins t PE C, i ts p a st a nd pr e se nt o ff

ic e rs , d ir e c tor s and

e mpl oy e e s, and its a tto rn e y s, ins ur e rs , and a g e nts . PE C and

the I nd ivi du a l D e fe nd ants a lso re le a se d any c la ims re late d to the su it a g a ins t any other pa rty , including the settlement class. In exchang e for this release , P E C agr eed to r etire $23 milli on in patronag e ca pital by bill credits to me mbers over a period of five y ear s, underg o and pay for a “comprehe nsive and indepe ndent re view of the financ ial and mana g ement oper ations of the PEC ” by

Na vig ant C on su lti ng , a

n in de pe nd e nt c on su lti ngfi rm , an d p ay the Cla ss Represe ntatives’ attorne y s’ fe es and othe r cour t costs, up to an amount of $4 million. The settlement ag ree ment also stated that the suit would proce ed as a non-opt-out class a ction. See T e x. R. Civ. P . 42(b)( 2).

On April 30, 2008, t he trial court held an evidentiary hear ing on the fairne ss of the settlement and c ertifica

tion of the settlement class. At the he aring , which wa s continued on May 5,The trial c ourt’s docke t sheet re flec ts that 268 o b j ec t i o ns were filed by

the May 2, 2008 1 filing de adline. Two other c lass members a lso filed notices of a ppeal, but this Cou rt , by order dated 2 November

21, 2008, dismiss ed one of those a ppellants on his own motion and the other for want of prosec ution. 6 the tr ia l c ourt

a llo we d me mbe rs of

the se ttl e me nt c la ss t o v oic e the ir ob je c tio ns . T he tr ia l court

a lso
re vie we d a

nd c on sid e re d o ve r 2 00 wr itt e n o bje c tio ns that w e re fi le d b y c la ss m e mbe rs . 1 Following the fa irness hea ring , the t rial court signe d a fina l judgment a pproving the
se ttl e me nt, c e rt if

y ingth e cl ass , ap po in ti ng cla ss cou ns el a ndrepr esen tat iv es, andaward in g a tto rn e y s’ fee s and costs to the Class Represe ntatives in the amount of $4 mi llion. Hall, a class member who ob je c te d to the se ttl e me nt, fi le d th is a pp e a l. 2
DI SCU SSIO N Hall ra ises the following arguments on appea l: (1) that the settlement a g ree ment was
no t pr op e rl y app rove d b y the pa rt ie s and that th e a

pp ro va l w a s b a se d o n im pr op e r m oti vatio ns , (2 ) t hat no tic e to t

he se ttl e me nt cl a ss wa s ina de qu a te , (3) that the tr ia l court e rr e d in a pp oin tin g c la ss
re pr e se ntativ e s and c la ss c ouns e l, (4 ) that the tr ia l c ourt e rr e d in fa ili ng to a pp oint in ter im c la ss
c ouns e l, ( 5) that th e se ttl e me nt a g re e me nt p re se nte d a c on fl ic t of

int e re st betw e e n PE C and its
a tto rn e y s, (6 ) t

hat th e se ttl e me nt a g ree me nt i s unc on sc ion a ble , ( 7) that th e tr ia l c ourt imp ro pe rl y “proc rastinated” in cer

tify ing the settlement class, (8) that the trial cour t erre d by

fac ilitating settlement neg otiations between the parties, ( 9) that t he trial court’s appr oval of the se ttlement was based on a “faulty predic tion of t he complexity , expense, and likely duration of c ontinued litigation,”7

and (10) that the trial cour t erre d in cer

tify ing the class. Be ca u s e Hall fa iled to preser ve er ror reg ardinga number

of these a

rg uments, we must first addre ss the issue of wa iver.
W aiver of Error

An unnamed c lass member w ho objects to a settlement at a f airne ss hear ing ha s standing to appea l the trial cour t ’s decision to disreg ard his objec tions. De v lin v . S c ar de lle tti , 53 6 U .S. 1, 9 ( 20 02 ); City of San Benito v. R i o Gr a n de Valley Gas Co. , 109 S.W .3d 750, 752 (Tex. 2003). Howe ver, the fac t that unnamed, objecting class m ember s may appea l their objections to a class se ttlement does not sugg est that such cla ss members ar e ex empt from the requireme nt that complaints must be properly raised in the tr ial court in or der to be prese rved f or appe llate re view. See Te x. R. A

pp . P. 33 .1 (a ); see also Northrup v. Southwestern Bell Tel. Co. , 72 S.W .3d 1, 13 n.20 (Tex. App.—Corpus Christi 2001, no pet.) (“It is quite possible that while an unname d class member may have standing to b ri ngan appe a l, h e may have wa ive d c e rt a in i ssu e s b y fa ili ngto a de qu a te ly prese nt them to the trial court.”) . Fur thermore , an appellant may not r ely on the objections of other
c la ss m e mbe rs to p re se rv e iss ue s n ot r a ise d in his ow n o bje c tio ns , a s the S up rem e Co urt h e ld i n De v lin that an unname d cl as s m em b er “ will only be allowe d to appea l that aspec t of the District Court’s order that aff

ects him—the Dis trict Court’s decision to disreg ard his ob je c tio ns .” 53 6 U .S.
a t 9 ( e mph a sis a dd e d) ; see also Citize ns Ins. Co. v. Dacc ach , 217 S.W .3d 430, 449 (Tex. 2007) (obser ving that in c lass action context, Te x as courts may rely on “per suasive fe dera l decisions and authorities i n t erpreting curr ent fe dera l class ac tion requireme nts”). As a result, Hall’s issues on
a pp e a l are lim ite d to tho se matte rs ra ise d in his wr itt e n o bje c tio ns to t he se ttl e me nt a g re e me nt.Hall’s wr itten objections, filed April 14, 2008, do not appe ar in the recor d on appea l. Upon 3 revie w of the tria l court’s docket sheet, it a ppear s that the written objec tions of Martin Reeve s, which we re fi le d Apr il 2 3, 20 08 , a nd be ar t he no tatio n, “ Pr e pa

re d b y : D a vid

Al le n Ha ll, ” we re mis take nly rec orded on the docket a s Hall’s objec tions, and were subsequently desig nated f

or inclusion in the appellate rec ord as suc h. PEC has i n cl u d ed Ha l l ’s actual objections as an a ppendix t o its brief. Whi l e t h i s d ocument does not a ppear in the rec ord, we note that it is essentially identical to the objections of Mar

tin Reeves, which wer e prepa red by Hall and identified a s Hall’s objec tions on the docket. We will there fore rely on the R eeve s objections to repre sent the substance of Ha ll’s ob je c tio ns . Whil e Ha ll makes an e quitable ar g ument that cer tain problems with the settlement we re 4 not fully reve aled until the fairne ss he aring , we note that the hea ring , which beg an on Apr il 30, 2008, was c ontinued to a sec ond day on May 5, 2008, in order to a ccommodate additional objections filed prior to the May

2 filing de adline. The issues Hall complains of on a ppeal— al l o f wh i ch we re at least pre liminarily addre ssed during t he first day of t he fairness hearing —could have been r aised by written objec tion prior to the deadline. 8

A g ener ous rea ding of

Hall’s wr itten objections reve als that he ha s p r o p e r ly p r e serve d his a ppellate complaints that the notice to the settlement class was insufficient and that the settlement ag ree ment is unconscionable. Ha ll als o ap pe are d at the fa ir ne ss he ari ng and

ma de an o ra l r e qu e st 3 for inter im class counsel. While this request was made afte r the deadline f or filing objections, we wi ll c on sid e r t

he iss ue to b e pr e se rv e d f or a pp e llate re vie w. I n a dd iti on , w hil e Ha ll d oe s n ot r a ise a spec ific point of er

ror on a ppeal r eg ardingthe fa irness, a d equacy , and re asonable ness of the settlement ag ree ment, his brief include s an extensive discussion of this i ssue. B eca use the que stion of whe ther the trial court err ed in a pproving the settlement ag ree ment turns on the fa ir-ade quate- andrea sonable inquiry

and bec ause PEC conc edes on a ppeal that Hall’s objec tion sufficiently prese rved this matter for a

ppellate r eview, w e will addre ss it as well. The remainder of Hall’s complaints on appea l were not addre ssed in his objections to the trial court a nd are there fore waived. We will now 4 addre ss those issues for which e rror was pre serve d.9

Not ic e to t

he Se ttl e me nt C

las s Ha ll r a ise s a

numbe r of argum ents r e g ard ingthe no tic e to t he se ttl e me nt c la ss,
c la imi ngthat it

fa ile d to su ff

ic ie ntl y e xpla in t he un de rl ying c on tr ov e rs y or se ttl e me nt te rm s, that it did not affor d ample time for me mbers to file objec tions, that newspaper publication of the notice was inade quat e to r e a ch all cla ss members, and that additional discovery should have be en conduc ted and made available to class member s prior to dissemination of the notice.

Th e pr e se nt s uit

wa s c e rt if

ie d a s a c la ss a c tio n un de r ru le 42 (b )( 2) , w hic h a pp lie s to class ac tions invol ving injunctive a nd decla ratory relief
. See Tex. R. C iv. P. 42(b)(2). When a 42 (b )( 2) a c tio n is c e rt if

ie d, pe rs on a l no tic e to t

he me mbe rs is p e rm itt e d b ut n ot r e qu ir e d. Te x. R. Civ
. P. 42 (c )( A) (“ F or

any c la ss c e rt if

ie d und e r R

ule 42 (b )( 1) or

(2 ), the c ourt

may dir e c t a pp ro pr iate
no tic e to t he c la ss. ” ). I f a

se ttl e me nt a g re e me nt i s re a c he d, ho we ve r, “ [n]ot ic e of the mate ri a l te rm s of the propose d settlement . . . shall be g iven to a ll membe rs in such manne r as the c ourt direc ts.” Tex. R. C iv. P. 42(e)(1) (B ). “The mecha nics of the proce ss of g iving notice of a pr oposed settlement
ar e left to the discre tion of the court subjec t to the rea sonablene ss standards imposed by due proce ss.” Ball v. Farm &Home Sav . Ass’n , 747 S.W .2d 420, 424 (Tex. App.—For t Worth 1988, writ denied) . To satisfy due proc ess, notice should be “ re as onably calc ulated, under

all the circ umstances, to apprise inter ested pa rties of the pe ndency

of the a ction and af

ford them a

n opportunity

to present their

objections.” Mullane v. Central Hanove r Bank & Trust Co. , 3 39 U. S. 306, 314 (1950). “ [T] here are no rig id standards g overningthe contents of notice , and numer ous decisions have approve d very g ener al desc riptions of the proposed se ttlement.” Ba ll , 747 S.W .2d at 425.10 Prior to dissemination, the notice in the pr esent c ase w as re viewed a nd approve d by both the trial court a

nd Charles S ilver, a profe ssor who t estified at the fairness hearing as an e x pert in class-a ction litigation. The notice, which was mailed di rec tly to all PEC members and published in 33 local and r eg ional newspa pers, infor

med the members that a class action settlement had be en
rea ched in a

lawsuit involving “a lleg ations of wrong doing by the PEC, its direc tors and
mana g e me nt. ” Th e no tic e fu rt he r p ro vid e d a

br ie f s umm ary

of the mate ri a l te rm s o f the se ttl e me nt, inc lud ingthe pla

n to re tir e $2 3 milli on in patr on a g e c a pit a l, an awa rd of a tto rn e y s’ fe e s, e xpe ns e s, and bonuses to the c lass repr esentatives not to ex cee d $4 milli on, the Navig ant re view, and the rele ase of related class a ction and der ivat i v e cl aim s. The notice dir ecte d members to the PEC website to view co p i es of the settlement a g ree ment and the Class Repre sentatives’ live pe tition, pr ov ide d a

te le ph on e numbe r w he re me mbe rs c ou ld obt a in ad dit ion a l inf or matio n, pr ov ide d d e ta ils reg ardingthe upcoming fairne ss hear ing, a nd explained the proce dure for f iling wr itten objections to the settlement. Fina lly , the settlement conta ined the followingnotice:
Y O U R R IG H T S W ILL B E A F F E C T E D B Y T H E S E LE G A L P R O C E E D IN G S
. IF THE COURT APPR OVES THE PROP OSED SETTL EMENT, YOU WI L LHAVE NO F UTURE RI GHT TO CON TEST THE F AI RNESS, REASONAB L ENESS OR ADEQU ACY OF THE PROPOSED SETTL EMENT, OR T O PURS UE THE REL EA SED CL AI MS.
Whil e Ha ll contends that the notice is inade quate be cause it fails to fully descr ibe the details of the unde rlying c ontroversy or the settlement a g ree ment, “cla ss me mbers need not ‘ be made cog nizant of every

materia l fac t that has t aken place pr ior to the mailing of their individual notice.’” Peters v . Blockbuster, I

nc. , 65 S.W .3d 295, 308 (Tex. App.—Be aumont 2 0 0 1, no pet.) (quoting11

In re Nissan Motor Corp. Antit rust Li tig. , 552 F.2d 1088, 1104 ( 5th Cir. 1977)). Signific antly , the notice in this case provided membe rs with a telephone number to obtain additional information, as well as the w ebsite whe re both the se ttlement ag ree ment an d t he plaintiffs’ live pe tition was available . “Ge nera lly , a notice w hich prompts class member s to investigate and which g ives the
c la ss m e mbe rs the inf

or matio n th e y

ne e d to ob tai n co mpl e te inf or matio n a bo ut t he se ttl e me nt i s adequate.” Pe te rs , 65 S.W .3d at 308. Whil e Hall speculates that PEC member s in rural a rea s may not have a d eq uate Interne t acc ess to revie w mater ials on the PEC website, the provision of a telephone numbe r to obtain additional information sufficie ntly resolves this concer n. I n light of the notice’s summary

of t he settlement ter

ms, as well as the guidance provided for those seeking additional information, we hold that the notice in this case was adequate to inf orm the members of the mater ial provisions of the settlement ag ree ment. Se e id
. (f ind ingno tic e a dequate w he re c la ss members we re infor

med “that they

may obtain a copy

of the a g ree ment by

contac ting c lass counsel or by visiti ng [t he def

endant’ s] web-site.”). Ha ll a lso argue s th a t ne ws pa pe r p ub lic a tio n o f t

he se ttl e me nt

wa s in a de qu a te be c a

us e “in some publications” the te x t was “too small for many people to deciphe r,” a nd beca use “[a]ll but
a ha nd fu l of c ounti e s w ith in t

he PEC se rv ic e area r e ly on we e kly ne ws pa pe rs ,” rathe r t

ha n d a ily newspa pers. Ha ll does not co n t en d t hat the we ekly newspa pers f ailed to print the notice, but that
me mbe rs re lyingon

we e kly ne ws pa pe rs ha d les s time to fi le wr itt e n o bje c tio ns be fo re the fa ir ne ss he ari ng . H ow e ve r, the no tic e wa s not onl y pu bli sh e d in 33 loc a l and

re g ion a l ne ws pa

pe rs bu t a lso dir e c tl y ma il e d to e a c h PE C me mb e r an d p u b li s h e d o n th e PE C w e b s it e . A s a r e s u lt, a ny inadequa cies in the newspaper publication wer e sufficiently cure d by more dire ct forms of notice
.The notice actua lly s t at ed that objections filed by April 28 would be c onsidered at the 5 April 30 fair

ness hea ring , and that objec tions filed betwee n April 28 and May 2 would be conside red and ru le d o n by the tr ia l court a ft e r the he ari ng . B e c a us e the he ari ngwa s c omp le te d o n M ay 5, a ll objections filed by

May 2 had bee n revie wed a

nd considere d by

the cour t at that time. 12 See M ullane , 3 3 9 U
. S
. a t 3 1 8 ( “ W h e r e t h e n a m e s a n d p o s t
- o f f i c e a d dr e s s e s o f

t h o s e a f f e c t e d b y a pr oc e e din g are a t ha

nd , th e re a so ns dis a

pp e ar fo r re so rt to me ans le ss lik e ly tha n the ma ils to a

pp ri se them of its pendenc y .”).

Ha ll a lso argue s th a t th e no tic e , w hic h w a s ma ile d to m e mbe rs on Ap ri l 8, 20 08 , d id not allow for suff

icient time to file o b

j ections before the April 28, 2008 dea dline. The Apr il 28 d e a d li n e w a s a c tu a ll y e xte n d e d to M ay 2 , 2 0 0 8 , w h e n th e tr ia l c o u rt c o n ti nu e d th e h e ar ing to a
se c on d d ay

in o rd e r t o a c c omm od a te a dd iti on a l ob je c tio ns . There is no mini mum tim e fr ame that

5
mus t be a llo we d fo r the fi lin g of ob je c tio ns , b ut t

he no tic e mus t “ a ff

or d a re a so na ble tim e fo r t

ho se interested to make their

appea ranc e.” Ba ll , 747 S.W .2d at 424. We conclude that the trial cour t was not unrea sonable in allowing a total of 24 da y s betwee n issuance of the not ice and the dea dline for filing obje ctions. See U

.S. v. Alabama , 271 Fe d. Appx. 896, 901 (11th Cir. 2008) (not desig nated for publication) (holding that “the distri ct co u rt did not abuse its discretion in providing for two
we e ks ’ n oti c e be fo re ob

je c tio ns we re du e ” ); see a l s o Mars hall v. Holiday Magic, I nc. , 550 F.2d 1173, 1178 (9th Cir. 1977) (holding that 26 day s betwee n mailing of notice and de adline for

opting out of class wa s “more tha n adequa te”)
. Finally , Hall ar g ues t hat additi onal discover y should have be en conduc ted prior to the
ma ili ngof

the no tic e and

that se a le d d isc ov e ry

sh ou ld h a ve be e n ma de av aila ble to t he c la ss members. This ar g ument, though c ouched am o n g Ha l l’s complaints reg ardingthe form a nd13

su bs tanc e of the no tic e , a

pp e ars to b e an atta c k on the tr ia l court ’s de c isi on to ap pr ov e the se ttl e me nt, rathe r than on a

perc eived de ficienc y

in the notice. I n light of our deter mination that the trial court did not abuse its discretion in approvingthe settlement, see discussion inf ra , we ove rrule this issue
as we ll.
Interim Class Counsel

Hall argues that the trial court err ed by not a ppointing interim class c o u n s el as authorized by

Texas Rule of Civil P ro cedur e 42(g )(2) (A), which provides that a trial court “ may desig nate interim counsel to act on be half of the putative class be fore deter mining whe ther to ce rtify the ac tion as a cla ss action.” Te x . R. Civ. P . 42(g)(2)(A) . By the plain languag e of the rule, the appointment of interim counse l is discretionary , rathe r t han mandatory . Fur thermore , the trial cour

t did appoint interim counsel in this case, in an A pril 2, 2008 order

provisionally

approvingthe
se ttl e me nt and

pr ov isi on a lly

a pp oin tin g a s c la ss c ouns e l a nd c la ss r e pr e se ntativ e s th os e ind ivi du a ls who wer e later

confirme d in the final order
. Hall ar g ues that the trial c ourt should have a ppointed additional interim counsel, other than the attorne y s repr esentingthe C lass Represe ntatives, to review the settlement agree m ent. Hall provide s no authority to support this arg ument, but contends that the class membe rs wer e entitled to “objec tive leg al interpre tation” of the c omplex issues involved in the litigation.

Be cause Texas Rule of Civil Procedur e 42, g overningclass ac tions, was patterne d
a ft e r t he fe de ra l e qu iva le nt, F e de ra l Rule of Civ il Pr oc e dure 23 , T e xas c ourt s “ re ly on our p re c e de nts and per suasive fe dera l decisions and author ities interpretingcurr ent fe dera l class ac tion requi reme nts.” Dacc ach , 217 S.W .3d at 449. The a dvisory committee note on fe dera l rule 23“ Al tho ug h n ot b ind ing , th e int erpr eta tio ns in t he Ad vis or y Com mitte e No te s ‘ are ne arl y 6 universally

acc orded gr eat weig ht in interpre ting feder al rules.’ ” Horenk amp v. Van W

inkle &Co. , 4 0 2 F. 3 d 1 1 2 9 , 1 1 3 2 (1 1 t h C i r. 2 0 0 5 ) ( qu o t i n g Ve rg is v . G ra nd Vi c tor ia C

as ino & Re

so rt , 199 F.R.D. 216, 218 (S.D. Ohio 2000) ).

14 elabor ates on the a

ppointment of interim class coun s el wh en n ece ssary to conduct discove ry

or otherwise pr epar e for

cer tificati o n , s tating, “ Ordinar ily , such work is ha ndled by the lawy er w ho filed the ac tion. I n some ca ses, h o we v er , t h ere may be riva lry

or unce rtainty

that makes for

mal desig nation of interim counsel appropr iate.” Fe d. R. Civ. P . 23 advisory committee’s note. Th is 6 lang uag e sug g ests that the purpose of the rule authorizing interim class counse l is to clarify which of a g roup of c ompeting a ttorney s may

act on behalf of t he putative class prior to certification. The rule doe s not appea

r t o contemplate, a s Hall contends, that a trial court a

buses its discretion in failing to seek out and a

ppoint additional interim counsel for the purpose of r eviewinga settlement
a g re e me nt n e g oti a te d b y

the name d pla int if

fs ’ c ouns e l. As a re su lt, we ov e rr ule thi s is su e on

a pp e a l.
Un c on sc ion ab ili ty

Ha ll argues that th e se ttl e me nt a g re e me nt i s v oid a s an unc on sc ion a

ble c on tr a c t. Severa l of Hall’s points on this issue—that the unnamed class members did not assist in draftingthe ag ree ment, that settlement neg otiations took pl ace in an “opa que atmosph er e” beca use member s
wer e not awa

re of its terms until they rec eived notice of the upc oming f airne ss hear ing, a

nd that the unnamed c lass members had no barg aining power with which to neg otiate the settlement ter ms—can be summarized as a

g ener al public policy

argument ag ainst class ac tion settlements.15 The proc edura l rules g overningclass ac ti o n s include mec hanisms for prote cting unnamed c lass members whe n a settlement is re ache d. See B loyed , 916 S.W .2d at 953 (“One of the fore most objectiv es of Rule 42 is to protec t the interests of a bsent class membe rs.”) . Rule 42 provides eve ry

class member

the rig ht to object to a proposed settlement, Tex. R. Ci v. P. 42(e)( 4), and re quires the tria l court to find that the ag ree ment is fair, re asonable , and ade q u at e bef ore
a pp ro vin g it, Te x. R. C iv. P. 4 2( e )( C) . In d e te rm ini ngwh e the r t o a pp ro ve a se ttl e me nt a g re e me nt, the tr ia l c ourt

mus t c on sid e r, a mon g oth e r f a c tors , “ the re sp e c tiv e op ini on s o f t he pa rt ic ipa nts , including . . . the absent c lass members.” Bloyed , 916 S.W .2d at 955. Fur thermore , we a

re bound to e nf or c e ru le 42 , w hic h a

uth or ize s th e se ttl e me nt o f c las s a c tio n li tig a tio n b y the c la ss
re p re s en t ati ves. See Te x. R. C iv. P. 4 2( e ); Amche m Prods., Inc. v . W indsor , 5 2 1 U
. S. 5 9 1 , 620 (1 99 7) (“ [C]our

ts m us t be min df

ul that the [cl a ss ac tio n] rul e a s n owc omp os e d s e ts the re qu ir e me nts they are bound to enforc e.”)
. We further note the imprac ticality of allowingapproximately 220,000
c la ss m e mb e rs to p art ic ipate in s e ttl e me nt n e g oti a tio ns and tha t on e of the purp os e s o f t

he c la ss action mec hanism is to alleviate the logistica l pr oblems of having an unwieldy number of pote ntial p laintiffs. See Tex. R. C iv. P. 42(a) (pr oviding that c lass action suit may not be filed unless “ the
c la ss i s so nume ro us tha

t joi nd e r of a ll m e mbe rs is i mpr a c tic a ble ” ); Jenk

ins v. Raymark

Indus., Inc

. , 78 2 F .2 d 46 8, 47 1 (5 th Cir
. 19 86 ) (“ Th e purp os e of c la ss a c tio ns is t o c on se rv e ‘t he re so ur c e s o f b oth the cour ts and the par

ties by permitting a

n issue potentially

aff ect i ng ever

y [class member] to be litigated in a

n economica l fashion.’” ) (quoting Gene ral Tel. Co. of Southwest v. Falcon , 4 57 U. S. 147, 155 (1982)) . There fore , in light of the r ules authorizing c lass acti o n s et t l ements and the16

pr oc e dura l pr ote c tio ns in p la c e fo r un nam ed cla ss m e mbe rs , w e ov e rr ule Ha ll’ s p oli c y

argume nts reg ardingthe settlement neg otiations.

Ha ll f urth e r a rgue s th a t th e se ttl e me nt a g re e me nt i n th is c a se is a n unc on sc ion a

ble contra ct bec ause its terms ar e oppre ssive and unre asonable . Sp ec ifically , he conte nds that the ag ree ment’s re lease of liability const i t u t es a “ windfall of immunities” for PEC and the Individual Def endants, while the benef

its to t h e cl as s m embers in the form of patronag e ca pital cre dits are “illusory ” bec ause “ the member ship owns the credits.” The terms of t he settl ement agr eeme nt do not, as Hall claims, provide “g lobal rele ases for all claims, not just those related to the instant case .” Rather, the a g ree ment extends the rele ase of liability to c laims “ based upon, relating to, ar ising out of , c onne c te d to , o r s ub sume d w ith in a lle g a tio ns tha t ha ve be e n a sse rt e d” in t he und e rl yingsu it. Such a re lease is hardly

uncommon in the class ac t i o n settlement context. See, e .g. , W al- Ma rt Stores, Inc. v. Visa U.S.A. Inc. , 396 F.3d 96, 106 (2d C ir. 2005) (obse rving that “[b] road c lass action
se ttl e me nts are c omm on , s inc e de fe nd ants and the ir c oh or ts wo uld oth e rw ise fa c e ne arl y lim itl e ss lia bil ity fr om r e late d la

ws uit s” ); Berardinelli v. Gene ral Am

. Life Ins. Co. , 357 F .3 d 8 00 , 8 05 (8 th C i r . 2 0 0 4 ) ( “ T h e r e i s n o i mp r o p r i e t y i n i n c l u d i n g i n a s e t t l e m e n t a d e s c r i p t i o n o f c l a i m s t h a t is
so me wh a t br oa de r tha

n tho se that have be e n sp e c if ic a lly ple a de d. I n f

a c t, m os t se ttl ingde fe nd ants insist on this.”). Fur

thermore , while the patrona g e capital c redits ar e in fa ct held by PEC in t rust for the ind ivi du a l me mbe rs , the ut il it ie s c od e me re ly re qu ir e s PE C to re tur

n p a tr on a g e c a

pit a l to its members “ periodica lly ” and in a “manner d et er m i n ed by the boar d.” Te x . Util. Code Ann. § 161.059(d). Unde r the terms of the settlement a g ree ment, the member s benef it from a guara

nteed retire ment of $23 million i n patrona g e ca pital in the f

orm of bill cr edits. Whil e Hall points out that17

the boar d of direc tors voted in November 2007 to beg in disbursing bill cre dits, ge nera l manag er Juan Ga rza te sti fi e d at th e fa ir

ne ss heari ngthat th e po sit ive c ha ng e s in PEC po lic ie s a

nd pr oc e dure s, including the decision to retire patrona g e ca pital, were a dire ct re sult of the ong oing litig ation. As
a re sult, we disag ree with Hall’s charac terization of t he patronag e capital bill credits as “illusory .”

Hall cites seve ral oth er settlement terms that he conside rs oppre ssive and
unrea sonable, including the provision holding PEC, rathe r t han the I ndividual Defe ndants, liable for the $4 million attorney s’ fe es and c osts awar d, t h e l ac k o f o pt-out rig hts for cla ss members, the Navig ant re view of PEC oper ations, and the provisions pr eser ving the benef

its of unspecified or al ag ree ments betwee n PEC and its i ndividual office rs and direc tors, oral trusts bene fitting individual employ ees, a

nd future r etireme nt benef its for Bur

nett, the forme r pre sident o f t he boar d. Be y ond basic statements reg arding contra ct unconsciona bility , Hall has not provided us with any authorities supporting his a

rg uments that these par

ticular provisions ar e oppre ssive and unreasonable . Eac h of these provisions was addressed at the fairness hearing , and we do not find them to be so oppressive
or unre asonable as to rende r the a g ree ment unconsciona ble. Hall’s ar g ument reg ardingthe pay ment of the attorney s’ fe es and c osts awar d is that PEC’s insurer should shoulder “a ll defense and settl ement costs, less a $125,000 deduc tible,” and that the I ndividual D efe ndants should be held persona lly liable for some portion of the c osts. At the fairne ss hear ing, e vidence was pre sented that PEC’s insurer ha d ag ree d to cover $2.4 milli on of the attorney s’ fees and costs awa rd, and that the re maining $1.6 million would come solely from PEC funds. Professor

Silver, who testified as a

n expert in class ac tions and insurance law, stated, “I think the class is lucky

to be getting 2.4 milli on of [the attorney s’ fe e and c ost awar d] from the insurance18

company . . . . Iwas looking throug h the complaint and the settlement and thi nking about whether the ins ur anc e c omp anie s we re ob lig a te d to pa y any pa rt of the se los se s, and

re a lly , I ’v e ha d tr ou

ble fi nd ingany

thi ngtha t th e y wo uld have to p ay .” F ur

the r, PEC ’s ins ur e r iss ue d a re se rv a tio n o f r ig hts to c on te st c ov e ra g e fo r t

he c la ims ra ise d in

the Cla ss Re pr e se ntativ e s’ pe tit ion , c iti ngpo te nti a lly
a pp lic a ble e xclu sio ns in P EC’ s in sura nc e po lic y

fo r, a mon g oth e r t

hin g s, los se s in

c onne c tio n w ith
c la ims ari sin g fr om i mpr op e r g a in o r p ro fi t, f ra ud , o r b re a c h o f c on tr a c t. Th e po ssi bil ity for re c ov e ry fr om t he I nd ivi du a l D e fe nd ants wa s si mil arl y pr ob le matic . G arza

te sti fi e d at the fa ir

ne ss he ari ng that of

fi c e rs and dir e c tor s o f P EC a

re su bje c t to an indemnification resolution that was passed by the boar d in 1987. This resolution, which was enter ed into evidenc e, states that PEC will “ indemnify and hold harmless, individually , all office rs
and dir e c tor s of the Coo pe rativ e , G e ne ra l Ma na g e r F ue lbe rgand

Ge ne ra l Co un se l Mo ur sund a g a ins t any leg al ac tion that might be broug ht ag ainst any of them in relation to their service s to” PEC. See T ex . Ut i l
. Code Ann. § 161.078 (a uthorizi ng elec tric coope ratives to “inde mnify and provide indemnity

insurance in the same manne r and to the same ex t en t as a nonprofit corpor ation”). Professor Silver testified that “it is ve ry uncommon to ge t contributions from individual officer s and dire c to r s o f

d e f e n d a n t c o r p o r a ti o n s ” in

c la s s a c ti o nli ti g a ti o n , an d th a t e v e nif

th e I n dividual Def endants wer e held persona lly liable in this case, PEC would likely be re quired to re imburse them under t h e indemnification ag ree ment. I n light of this evidenc e, the pa y ment provisions of the settlement ag ree ment do not appea r t o be so oppressive and unre asonable as to rende r the a g ree ment unconsciona

ble. Ha ll’ s argume nt r e g ard ingop t- ou t r ig hts , in its e nti re ty , is that “ PEC me mbe rs los e the rig ht to pursue individual litig ation. Parag raph 1.15 quashes all members’ rig hts to opt-out ofThe provision pr otecting separ ate ag ree ments with e mploy ees is also the ba sis for Hall’s 7 complaint reg ardingBur

nett’s re tirement bene fits. This complaint r elies solely on fac ts outside the rec ord and c annot be c onsidered. 19 the se ttl e me nt. ” Rul e 42 (b )( 2) sp e c if ic a lly a llo ws fo r a c la ss a c tio n wi th no op t- ou t ri g hts fo r c la ss members wher e, as here , the class seeks decla ratory and injunctive relief . Hall has not demonstrated that this provision renders the se ttlement ag ree ment unconsciona ble. Ha ll a lso vo ic e s c on c e rn

that th e Na

vig ant r e vie w is no t “ la

be le d a s an a

ud it. ” Th is
ma tte r w a s a dd

re sse d b y Ga rza ’s te sti mony

a t th e fa ir

ne ss he ari ng , in whic h he state d, “ [B ]ec a us e Navig ant i s not an auditing firm, we r efe r to it as an investig ation, but essentially it is a very

detailed look at all the financial transac tions that have occur red for t he prior te n y ear s, and then a look at our manag ement practice s g oing forwa rd.” The use of an “ investigation” rathe r than a n “audit” doe s not appea r to be an unrea sonable a

nd oppressive c ontrac t provision, and Hall has provide d us with no
a u t h o r i t y t o t h e c o n t r ar

y. Reg ardingHall’s complaints of unspecified or al ag ree ments or trusts, the ag ree ment
me re ly state s th a t it

do e s n ot w a ive or

rel ease claims fo r r ig hts or be ne fi ts t o w hic h PE C of fi c e rs , direc tors, or employ ees w ould otherwise be entitled under othe r agr eeme nts, including “any oral or written ag ree ment with PEC” and that any trusts se t up by PEC employ ees are included in the g roup of entities re lease d from li ability
. The ag ree ment g oes on to state t hat the provision re g ardingoral ag ree ments “shall not cre ate suc h rig hts or benef its, nor shall it revive rig hts or benefi t s t h at have been w aived or

rele ased se parately

and indepe ndently ” of the settlement ag ree ment. Garza testified at the fairne ss hear ing that he was not a war e that any

unspecifie d oral a g ree ments or trusts exi sted,
and no e vid e nc e to t

he c on tr ary

a pp e ars in t

he re c or d. As a re su lt, the se pr ov isi on s do no t se rv e to rende r the settlement a g ree ment unconsciona ble. 720 Be cause Hall has not demonstrated that the settlement a g ree ment is an
un c on sc ion a

ble c on tr a c t, w e ov e rr

ule thi s is su e on

a pp e a l.
W as the Settleme nt Agreeme nt Fair, Adequate, and Reasonable ?

Th e Te xas S up re me Cou

rt ha s p ro vid e d s ix fa c tor s th a t a tr ial c ourt

mus t take int o
acc ount when dete rmining w hether a pro p o sed cla ss settlement is fair, ade quate, a nd rea sonable. Bloyed , 916 S.W .2d at 955. These fac tors are : (1) whether the settlement was a product of f

raud or collusion, (2) the c omplex ity , expense, and likely duration of the litig ation, (3) the sta g e of the pr oc e e din g s and a mou

nt of dis c ov e ry c omp le te d, (4 ) the fa c tua l and le g a l ob sta c le s to the pla int if fs ’
succe ss on the merits, (5) the p ossible rang e of r ecove ry and ce rtainty

of dama g es, and ( 6) the respe ctive opinions of t h e p ar t icipants, including class counse l, class re prese ntatives, and a bsent class member s. Id. ; see also Parke r v. Anderson , 667 F.2d 1204, 1209 ( 5th Cir. 1982).

Ap pe llate re vie w of the tr ia l c ourt ’s a pp ro va l of

a c la ss s e ttl e me nt i s li mit e d, du e to “the strong judicial policy favor ing the resolution of disputes throug h settlement.” Parker , 667 F.2d
a t 12 09 ; s e e a ls o P ia m b ino v . Bailey , 610 F.2d 1306, 1328 ( 5th Cir. 1980) (settlements favored be c a us e “ the y pr od uc e an amic a

ble re so lut ion of dis pu te s and min imi ze d e mand s o n ju dic ia l ti me
and re so ur c e s” ). On

a pp e a l, “ an a

pp ro ve d s e ttl e me nt w ill no t be up set un less the c ourt c le arl y abused its discre ti o n.” Id
. I n revie wing whether the trial cour

t’s approva l of the settlement
a g re e me nt w a s a

c le ar a bu se of dis c re tio n, we wi ll a dd

re ss e a c h of th e si x factor s d e sc ri be d in Bloyed . 916 S.W .2d at 955. 1. Fraud or Collus ion I n the final judg ment approvingthe settlement, the trial court made the following fi n d i n g:21

[T] he Court finds that there is no evidence of fr aud, collusion, or willful misconduct in respec t to the determination to settle, rather, the Court finds that the Settlement was the result of ar

m’s leng th neg otiations, after e x tensive discover y and brie fing on the me ri ts, and ba se d on inte lli g e nt ev a luatio n of the laws uit by the pa rt ie s and the ir counsel.
Ha ll’ s a sse rt ion s tha t the a g re e me nt wa s the pr od uc t of fr a ud or c oll us ion are ba se d pri mari ly on his dissatisfa c ti o n w it

h th e s e tt le me n t te r

ms an d th e f

a c t th a t th e a

b s e n t c la s s me mb e r s w e r e not involved in the neg otiation process. The mere fac t that a proposed se ttlement ag ree ment was re ache d without the input of absent class membe rs does not re nder the ag ree ment the produc t of fra ud or
c oll us ion . A s p re vio us ly

dis c us se d, the tr ia l c ourt

a llo we d a

bs e nt c la ss me mbe rs to f

ile ob je c tio ns , and re viewed a

nd considere d all objections befor e approving the settlement ag ree ment. See Te x. R. Civ. P . 42(e) (4) ( providing absent c lass members r ight to objec t to proposed settlement).

To the extent that Hall acc uses the trial c ourt itself of fr aud or c ollusion wit h the part ie s, the re is n o e vid e nc e to s up po rt the se a lle g a tio ns . T he tr ia l c ourt ’s inv olv e me nt i n c la ss
se ttl e me nt ne g oti a tio ns wa s no t imp ro pe r be c a us e , “ [w]hi le the tr ia l c ourt g e ne ra lly pla y s a re lativ e ly de ta c he d r ole in m os t c ivi l pr oc e e din g s, in a c la ss a c tio n th e c ourt

is t he guardi an of the c la ss interest.” Bloyed , 916 S.W .2d at 954. As the guardia n of this int er es t , t h e co u rt has an “ inhere nt power to manag e the c lass action,” In re Corrugated Container Antitrust Liti g. , 643 F.2d 195, 225 (5th C i r. 1 9 8 1 ), and is requir ed “to police the proc eedingto minim ize conflicts of intere st and, primarily , to protect a

bsent class membe rs,” Bloyed , 916 S.W .2d at 954. I n light of the trial court’s e x press findingthat the settlement ag ree ment was not the product of f

raud or collusion and the lac k of evide nce to the c ontrary , we hold that this factor w eig hs in f a vo r o f a pp ro va l of

the se ttl e me nt a g re e me nt.Hall also claims that PEC’s insurer, rather than P EC, will be responsible for the expenses 8 of continued litig ation. This assertion is inacc urate . Havingfully discussed the issue of PEC’s insurance cover ag e, we need not a ddress it furthe r. 22 2. Complexity, Ex

pense, and Like ly Duration of the Lit igation I n its ord e r ap pr ov ingthe se ttl e me nt a g re e me nt, the tr ia l c ourt state d, “ Ha d th e c a se not settled, it is l ikely

that the litigation, and a

ny cer tain appea l, would continue for year s; the parties would incur immense attorney s’ fe es and c ause c ontinued disruption to all.” Hall, howeve r, ar g ues t h a t“ l i t t l e o f

t h e r e l i e f s o u g h t[ b y t h e c l a s s ] r e m a i n s u nr e a l i z e d , ” an d

t h e r e f o r e t h e f u tu r e c o mp l e x i t y,
e xpe ns e , an d like ly duratio n of the lit ig a tio n is min ima l. I n de sc ri bin g the re lie f so ug ht by the c la ss, 8 Hall foc uses solely

on the positive g overna

nce c hang es made by

PEC duri n g t h e pendenc y of the litigation and ignor es t he other benef its acc ruing to the class membe rs as a result of the se ttlement ag ree ment, including the $23 milli on patrona g e capital retire ment and submission to t he Naviga nt
re vie w o f PEC’ s busi ne ss an d fin anc ia l re c or ds . T he a c hie ve me nt o f p os iti ve g ov e rn anc e c ha ng e s, while a be nefit to the cla ss, does not reduc e t h e co mplex ity , expense, or likely duration of f

uture lit ig a tio n r e late d to the re ma ini ngfo rm s o f r e lie f s ou g ht b y the c la ss. Fur thermore , the trial cour

t emphasized at the fairness hearing that future litig ation
wo u l d b e p ar t i cu l ar l y

d i s ru p t i v e i nt h i s ca s e, s t at i n g: When people g et up in the morning , they walk over

to the wall, t hey flip their switch and the lig hts c ome on , a

nd that’ s th e wa

y it s ho uld be
. Th a t’ s the re a so n we c a ll i t “a utilit y . ” I t i s essential to the schools, to the businesses, to the pe ople who live within that service are a, and we need not interfe re with that in the least. And so one of my g oals in supervising this li tigation was to try to minim ize the disruption that occur red to that essential primar y business, which wa s the continuing providing of power to that service are a.23 Under the circ umstances, it wa s not unrea sonable for the trial cour

t to conclude that the complexity , expense, and likely duration of continued litigation weig hed in favor of a pproving the se ttl e me nt.
3. Stage of the Proce edings and Amount of Discove ry Completed “A tria l court cor

rec tly analy zes this factor by

deter mini n g whether

sufficie nt discovery has be en co nducted to allow the pa rties to make a

n informed de cision about the relative merits of th e ca se and the settlement.” J oh ns on v . S

c ott , 113 S.W .3d 366, 372 (Tex. App.—Be aumont 2003, pet. dism’d). The tr ial court should also consider “whe ther c ounsel had an a dequate appre ciation of the me rits of the ca se be fo re n ego t i at ing.” In re Ge ne ra l M oto rs C o r p . Pick- Up Truck Fue l Tank Prods. Li ab. Liti g. , 55 F.3d 768, 813 ( 3d Cir. 1995). I n its order approvingthe settlement, th e trial c ourt found that at the time se ttlement neg otiations beg an, “[t] hirteen de positions had been taken and almost 25,000 pag es of documents had been e x chang ed. Pending be fore the Court wer e six Motions for Summary J udg ment and one Motion to Dismiss.” Hall ar g ues that the c lass members c annot “a ssess their position in a settlement neg otiation” unt i l t h e Navigant r eview is c ompleted, or until any potential leg islative or cr iminal investigations are c ompleted. Howeve r, the rec ord re flec ts that a substantial amount of discover y had bee n conducte d at the time the settlement ag ree ment was approve d, including de positions of key ind ivi du a ls a

nd the pr od uc tio n of al mos t 25,0 00 pa g e s of doc ume nts . Und e r t he se c ir c ums tanc e s,
we c annot conc lude that the trial court err ed in f inding that suff

icient discover

y had bee n conducte d to allow the par

ties to make an infor

med dec ision about the rel at i v e m er i ts of the ca se and the
se ttl e me nt. See D’Amato v . DeutscheBank , 236 F.3d 78, 87 (2d Cir. 2001) (holding that “stag e of24

proce eding s” fa ctor we ighe d in favor of settl ement appr oval wher e “the parties ha d eng ag ed in an extensive ex chang e of doc uments and other inf ormation”).
4. Fa c tua l an d Le

ga l O bs tac le

s to thePlain tif

fs Pre v ail ing

on theMe rit

s “In d ec i ding whether

a cle ar a buse of discr etion has occ urre d, . . . absent fr aud or collusion, the most im portant fa ctor is the proba bility o f t he plaintiffs’ suc cess on the me rits.” Parker , 667 F.2d at 1209. A number of potential o b s t ac l es we re d i s cu s s edi nt h e f ai rn es s h ea ri n g, including the issue of whether a derivative claim could be br oug ht ag ainst an entity g overne d by

the Electric Cooperative Corpor ations Act, the que stion of whether the PEC board of dire ctors could be
rem o v e d u n d e r th e T e xa s N o np r o f

it Co r p o r a ti o n s A c t, an d

th e is s u e o f

c la s s a c ti o nc e rti f

ic ation, which the trial court stated was “problematic” beca use “there has not been a

class ac tion approved by the Tex as S upreme Court since 2000, that Iknow of.” The trial court also stated at the he aring that the plaintiffs’ c ase r elied hea vily on “novel theor ies.” I n addition, sever al pot entially dispositi ve mot ions were pending befor e the c ourt at the time of the fa irness hea ring , including the defe ndants’ mot ion for summary judgme nt based on the statute of limitations, the I ndividual Defe ndants’ motion for summary judgme nt based on a

lack of duty to the plaintiffs, the def endants’ pa

rtial motion for summary j u d gment on standing , the de fe nd a nts ’ m o t i o nf

o r p art i a l s u m m ar

y j u d g m e n t

b a s e d o na l a c k o f c o n t r a c tu a l d a m a g e s to pla int if fs , th e de fe nd ants ’ m oti on fo r p art ia l summa

ry jud g me nt on th e breac h o f c on tr a c t c la im relating to patr onag e ca

pital, and the def

endants’ motion to dismiss for f ailure to c omply

with the tr ia l c ourt ’s or de r o n s pe c ia l e xce pti on s. I n its order a pproving the settlement, the trial court found that its rulings on these motions could potentially chang e “the leg al landsca pe of the case .”25 I n ref ere nce to this fac tor, Hall ar g ues that the “ [p] laintiffs have alre ady rea liz ed
near ly ever

y reque sted reme dy .” L ike many of Ha ll’s previous ar g uments, this st atement ig nores the fac t that a sig nificant portion of the benef its to t he c l as s we re realized only as a r esult of the
se ttl e me nt a g re e me nt. I n a dd iti on , th e fa c t th a t th e c la ss ha s r e c e ive d nume ro us be ne fi ts a s a re su lt of this litigation, de rived either from the settlement ag ree ment or from PEC’s positi v e i n t er nal
c ha ng e s p ri or

to s e ttl e me nt, do e s n ot n e c e ssa ri ly have be ari ngon

the pr ob a

bil ity of the pla int if

fs ’
succe ss on the merits, as t hese chang es m ay have been prompted, at l east in par t, by the extensive media attention and attendant public outcry reg ardingthis case. Given the fac tual and leg al obstacle s to t he pla int if

fs ’ su c c e ss on the me ri ts, the tr ia l c ourt did no t a bu se its dis c re tio n in

fi nd ingthat th is fa c tor we ig he d in

fa vo r o f a pp ro vin g the se ttl e me nt.
5. Range of Rec overy and Certainty of Damages The trial c ourt and the pa rties emphasized duringt h e fa irness hea ring that any
rec overy of monetar

y dam a g e s w o u ld

likely be paid by

PEC—and by

extension, i ts members—rather t h an t h e Ind i v i d

u al De fe n d an t s o r P E C ’s i n s u re r. Ga rz a a d dre s s edt h i s i s s u e i nh i s t es t i m o n y , s t ati n g, “The re is no mag ical sourc e of mone y here
. The money comes from our members. . . . [T] hat’s bee n my frustration with thi s lawsuit, that the only source of funds is our membe rship.” Fur thermore , the plaintiffs’ c hance s of obtaining relief at trial are uncertain in lig ht of the pr e vio us ly

dis c us se d o bs ta c le s to the pla int if fs ’ suc c e ss on t

he me ri ts. Gi ve n th is unc e rt a int y and the f act that most, if not a ll, moneta ry damag es would come from the membe rs themselves, we hold that the trial court wa s not unreasona ble i n finding that this factor suppor ted appr oval of the26

settlement ag ree ment. See J ohnson , 11 3 S.W. 3d a t 37 4 (whe re c e rt a int y of dama g e s is e lus ive , th is fac tor could re asonably

support approva l of settlement).
6. Op ini on s o

f th e Pa rti c ipa nts The c lass counsel, the c lass repr esentatives, and the defe ndants ea ch expressly stated the ir a pp ro va l of

the se ttl e me nt a g reemen t in thi s c a se . O f a

pp ro xima te ly

22 0, 00 0 a

bs e nt c la ss members, 268 object i o n s we re f iled. The trial c ourt stated on the r ecor d that it reviewe d and
c on sid e re d e a c h o f t

he se ob je c tio ns . F ur

the r, the tr ia l c ou

rt a dd re sse d the ob

je c tio ns a t th e fa ir

ne ss hear ing, e x plaining to the c lass members in atte n dance why issues commonly

raised by

the objections could not f

easibly be incorporated into the final settlement ag ree ment. W h i l e t h e t rial court wa s r e qu ir e d to c o n s id e r th e o p in io n s o f a b s e n t c la s s me mb e r s , th e me r e e xis te n c e of objections is not sufficient t o rende r t he agr eeme nt unfair, inadequate , or unre asonable . “[I ]nherent in compromise is a yielding of absolutes and a n abandoningof hig hest hopes.” Cotton v. Hinton , 5 5 9 F. 2 d 1 3 2 6 , 1 3 3 0 (5 t h C i r. 1 9 7 7 ) ( qu o t i n g Milstein v. W erner , 57 F.R.D. 515, 524-25 (S.D.N.Y.1972)) . Given th e t ri al cour t’s car eful c onsideration of the members’ objections, as evidenc ed by

the leng thy

discussion of these conce rns during the fairne ss hear ing, w e hold that the tr ial cou rt su ff

ic ie ntl y c on sid e re d th e op ini on s o f t he pa rt ic ipa nts , in c lud ingc la ss c ouns e l, c la ss
re pr e se ntativ e s, and

a bs e nt c la ss m e mbe rs , b e fo re a pp ro vin g the se ttl e me nt a g re e me nt. Ba sed on our r eview of

the six fac tors set forth in Bloyed , we hold that the trial cour t did not commit a clear

abuse of discretion in appr oving the settlement ag ree ment as fa ir, ade quate, and re asonable
.27 CO NC LU SION Be cause we ove rrule e ach issue that was prope rly prese rved on a

ppeal, we aff

irm t h e t r i a l c o u rt ’ s j u d g m e n ti ni t s e n t i r e t y.

__________________________________________ Diane M. H enson, Jus tice Be fore J ustices Patterson, Waldrop and H enson Affir med Filed: Mar ch 5, 2009